Scalability
Last updated
Last updated
This discussion focuses on scaling the inverse economy. When addressing sustainability, we emphasize methods that foster fair value distribution and sustainable growth without compromising efficiency.
Consider ten different economies. What makes an individual choose one over others? It is similar to why you might choose one café over another. There is always an incentive behind the choice. However, if an economy gives more than it takes, how does it remain positive-sum? This leads us to the topic of value distribution. Proposed in Piketty’s theory, for sustainable economic activities and fair distribution, the economy’s growth rate (g) must equal or outpace the return on capital (r) (g >= r).
Incentives or contribution rewards help the economy mature. As values change hands through transactions, the tax on each transaction increases the value per unit of store. These rewards, funded by participants' taxes, are then used to incentivize others. However, this raises a concern: when the overall economic value is high, the tax burden for spenders can become too significant.
We aim to create certain opportunities where individual return on capital (r) can temporarily exceed the economy's growth rate (g), within a manageable and attractive range, before gradually decreasing. These incentives should attract participants while ensuring that overall growth (g) remains greater than or equal to the average return (r) still holds.
Imagine paying a tax and receiving an investment product as a reward—one that has a supply limit and becomes increasingly scarce over time. Each unit of the reward can generate yield at the same rate as others, but the rewards themselves do not generate income automatically. Users must actively participate in an economic game, competing against each other. Since returns are limited and distributed over specific timeframes, those who perform better may receive returns above the average.
These rewards are infinitely reusable, but as more rewards are minted, the utility of each unit decreases proportionally. As multiple participants mint rewards, the competition intensifies and becomes more decentralized. For those uninterested in participating, the rewards can be sold for a one-time earning or lent out for interest. This also means the rewards could be priced and traded in open markets, adding another layer of value and utility.
Next, we discuss how to measure and time these opportunities to ensure they provide attractive returns for competition. While the economy’s value is used as a metric, it does not produce a linear graph. Linear calculations, though straightforward and fair, might not be compelling enough for robust competition. A stepping approach, with an appropriate timeframe, can make competition more enticing. We refer to these steps as “maturity stages,” with the time to progress depending on the economy's growth rate.
In Inverse Economics, The burned tax value is distributed proportionately to all participants, contributing to economic growth (g). Taxpayers receive utility rewards for these contributions, which can be used independently to generate value. The returns generated from these rewards are considered the capital return (r).
The stable utility level within each maturity stage is where competition occurs, and it intensifies as the economy approaches the next stage. If the total returns for each stage decrease in line with the economy's growth, each subsequent stage will take longer to complete than the previous one. This extended duration further intensifies competition, as participants have more time to maximize their returns before the utility levels decline.
Imagine that the duration Y in the image is longer than duration X, with each subsequent stage taking increasingly longer as utility levels decrease. This extension over stages can lead to a more prolonged and potentially more decentralized process as new participants enter the fray. However, is it possible that duration Y becomes shorter than X, the answer is yes, the speed of growth in each maturity can be variable, depending on tax volume.
Although spending incentives may diminish as the economy grows, their value remains intact. In Inverse Economics, the economy's growth (g) directly reflects the value of these incentives. This concept is similar to Bitcoin halving but is more flexible and dynamically responsive to market efficiency.
Overall, this dynamic prioritizes economic growth (g) over average return on capital (r), scaling down the incentive effect based on the economy's growth.
competition is divided into two parts:
Earning rewards is competitive, as they are gained solely through tax payments, making them a valuable investment. Timing transactions well can lead to higher rewards, especially in the early stages when token values are low. As the economy matures and rewards become scarcer, their value naturally increases
As demonstrated in Measurement, the utility of these rewards can be maintained within a specific maturity stage, creating a window for optimal use and intensifying competition. If rewards are reusable, some participants may achieve a return on capital (r) greater than the economy's growth rate (g). However, those who do not frequently utilize their rewards may see their r fall below g.
With dynamic time constraints, users may need to develop strategies to maximize ROI from their rewards, potentially involving third-party management. To facilitate this, rewards should remain flexible and not be confined to in-system use, allowing for broader integration and independent utilization. By tokenizing rewards as fungible tokens, opportunities for arbitrage trading, lending, and more become accessible. DeFi protocols, organizations, and developers can harness this flexibility by integrating their services, offering new functionalities to this utility token, which gains value and becomes increasingly scarce as the economy matures. This concept ties into Value Control.
As the economy matures, Inverse Economics employs quantitative deductions as a scaling solution to maximize the value of each incentive, prioritizing growth over average capital returns. This approach, driven by open competition across maturity stages, promotes the system’s appeal for onboarding a larger number of users. In this economy of value, individuals benefit from improved outcomes as the value of their holdings increases.
